Hi Nige,
It's been a while since I used Flash (MX) with AM, but I'll try to answer.
Realistically, I think the answer to all of your questions is "no", but it'll depend on exactly what you have in mind. If you mean to use the SWF as a looping video/background for the frame, then the answer is no. SWF is not an accepted extension for looping videos in AM. For SWF's you must use the Flash Plug-in and they cannot loop infinitely. Once a Flash movie is playing in AM, it simply plays until you get to the END frame. An END frame for the SWF is essential or else you became stuck in the movie instead of exiting back to AM. So, AM plays the SWF, but it doesn't interact with it or vice versa.
As Candle said, you need a GIF sequence for the sprite's walk sequence. I'm not sure how you'd go about scripting the other animations like jumping or picking something up. I don't think that transparent SWFs work in AM since they require HTML code (or used to) and a browser. For the same reason, you cannot hide the right click Flash menu in AM. There are also other problems with using Flash. For instance, you can only have one "door" leading out of an SWF movie to an AM frame. And if you use Flash for a puzzle, the person MUST solve the puzzle and reach the END frame of the SWF file, or else they are stuck in the puzzle indefinitely. There's no, if you solve it go on to Frame 2, but if you don't go back to Frame 1.
You can do an awful lot of neat things, though, with AM, especially if you utilize ShadowHunter's EZTalk and other plug-ins.